Microsoft's current retail strategy involves two different configurations of the Xbox 360 in most countries: the Xbox 360SKU, frequently referred to as the Xbox 360 Premium Package; and an Xbox 360 Core System SKU. At launch, the Xbox 360 was priced at USD $399. The Core System is not available in Japan, instead Microsoft offers a package identical to the Xbox 360 SKU for JPN ¥37,900. Japanese pricing of the console has drawn some criticism, as customers there are able to purchase the Xbox 360 small package, albeit one region-coded for Japan, for a lower price than in other countries. Additionally in Australia and New Zealand the Xbox Live headset in the Xbox 360 Premium Package was not included . The cost in the UK has been set at GBP £219 for Core, GBP £279 Premium.
BusinessWeek magazine compiled a report that estimates the total cost of components in the "premium" bundle at $525 USD, sans manufacturing costs, meaning that Microsoft is losing money on every Xbox 360 system sold (in the United States, at least). It should be noted that the strategy of selling a console at a loss or near-loss is common in the console games industry, as console makers can usually expect to make up the loss through game licensing. Furthermore, since Microsoft owns the intellectual property rights to the hardware used in the Xbox 360, they can easily switch to new fabrication processes or change suppliers in the future in order to reduce manufacturing costs. This flexibility stands in contrast to the situation faced with the original Xbox, which contained a processor from Intel (a slightly modified Pentium III) and a GPU from NVidia (a modified GeForce 3). Because of the added expense of these chips and the inclusion of a hard drive component, Microsoft was never able to reduce Xbox manufacturing costs below the break-even point. As a result Microsoft's home entertainment division posted a loss through nearly every quarter of the console's lifecycle, including a loss of US$ 38 million during Microsoft's 2005 Q3, at the Xbox 360 launching. Microsoft is predicting that with the Xbox 360, a greater market share and falling hardware costs will eventually make system sales profitable.
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